Cash-out refinancing can help you seal a better mortgage deal while tapping on your home equity. After paying your existing mortgage, you get to have a new one, and at closing, you get to receive a cashback. You can use the funds for debt consolidation and home improvement projects.
In Texas, Cash Out Refis are Texas (a)(6) mortgages. Specific rules apply in an (a)(6) loan, and this includes the Texas Cash Out Refinance rates, requirements and terms.
But what if your Cash Out Refi application got rejected? The following tips are the things you can do next.
Know The Reason For Getting A Cash-Out Rejection
When you applied for refinancing, you surely got your fingers crossed and hoped your lender would approve your application. However, not all refi applications get approved. The first step you will need to take is to ask your lender the reason why they denied you a cash-out refi. Some of the common reasons that can cost you your refi are as follows.
- Having a poor credit score
- Missed or late mortgage payments
- High DTI ratio
- Underwater mortgage
- Low or unstable income
Good Read: Should You Refinance Your Mortgage?
Improve Your Credit Score If Needed
If your reason for a refi denial is because of your poor credit score, then it only makes sense to make the necessary improvements to meet the minimum credit score requirement. Don’t be afraid to ask mortgage lenders about their minimum requirements as this can help you get a cash-out refi the next time you send your application.
Correct Any Credit Report Errors And Mistakes
You will want to check your credit report after getting denied for refinancing. Doing so will enable you to check if there are any errors or mistakes that you can dispute. This can help you get a better credit history and increase your chances of getting a refi approval.
Recommended Read: 6 Common Credit-Report Errors to Look Out For
Pay Down Your Debts First
Another common reason your refi application can get rejected is when you have too much debt. If your DTI ratio is more than 43%, work your way down and pay your debts first.
Talk To Your Current Lender But Keep Your Options Open
Your lender can help you formulate a strategy on how to get approved for a refi on your next application. However, keep your options open and shop around for other lenders and compare their rates and requirements. Don’t be afraid to negotiate. Unknown to most borrowers is that you can negotiate the terms of your cash-out refinance.
Don’t Delay Any Required Paperwork
Once you decide on a mortgage lender, make sure to submit your due paperwork on time. It can be a bit annoying knowing paperwork will be going back and forth. However, some will have a deadline. Miss one or turn down paperwork late and you can risk losing your chance of finally getting a refi.
Seek Help From A Real Estate Attorney
Not all countries and states will require a lawyer during closing. However, if you feel discriminated against during your cash-out refi application, a lawyer can help protect your rights.